Cisco said it settled to protect its customers who were targeted by the patent firm

Cisco Systems has come to an agreement with patent firm Innovatio IP Ventures in a dispute over Wi-Fi standards-essential patents that targeted its customers.

Under the settlement, Cisco will pay US$2.7 million to protect customers of 170 million Cisco devices. Innovatio admitted that over 100 million of the accused devices were already licensed, and agreed to be paid about 3.2 cents per wireless device for the remaining 85 million, Cisco's general counsel Mark Chandler wrote in a blog post on Thursday.

Cisco and Innovatio have in a filing on Thursday in the U.S. District Court for the Northern District of Illinois, Eastern Division asked that claims and counterclaims in two lawsuits before the court between the two companies should be dismissed "with prejudice to the re-filing of same," which would mean that Innovatio may not sue Cisco on the same claims. The parties also asked the court to dismiss all claims made by Innovatio against Cisco customers in the dispute.

Innovatio sued coffee shops, hotels, restaurants, supermarkets, large retailers, transportation companies, and other commercial users of wireless Internet technology in the U.S., according to court records. The company alleged that the wireless network users provide wireless Internet access to their customers or use it to manage internal processes, and by doing so infringe various claims of 23 patents it owned.

The makers of the gear used by the wireless network providers - Cisco, Motorola Solutions, SonicWall, Netgear and Hewlett-Packard - asked the court to rule that their products, and the networks or systems of which those products are a part, do not infringe Innovatio's patents, and that its patents are invalid.

In a ruling in October, District Judge James F. Holderman observed that the previous owners of all of Innovatio's patents contractually agreed with the IEEE to license on reasonable and non-discriminatory (RAND) terms any patents that were essential to the operation of the 802.11 wireless standard.

The judge determined that the RAND rate to be paid to Innovatio for licensing its portfolio of 19 standards-essential patents relating to the 802.11 standard was 9.56 cents for each Wi-Fi chip used or sold by the U.S. manufacturers. Four other patents were not considered in the proceeding to determine a RAND rate by consent of the parties.

Innovatio's attorney could not be immediately reached for comment.

Motorola and SonicWall had settled with Innovatio in the fourth quarter of last year.

Cisco said it spent $13 million on the litigation, not including the settlement amount. "But that expenditure would not have been necessary if Innovatio had met its obligations to license on reasonable and non-discriminatory terms, and had come to Cisco seeking a reasonable license first rather than targeting our customers and those of other manufacturers," Chandler wrote. He supported current legislation that passed recently in the U.S. House of Representatives, and would, among other things, make it difficult for users of products to be targeted.

Cisco has this week signed patent cross-licensing deals with Samsung and Google.

John Ribeiro covers outsourcing and general technology breaking news from India for The IDG News Service. Follow John on Twitter at @Johnribeiro. John's e-mail address is john_ribeiro@idg.com